Ethereum veteran Joey Santoro, the founder of Fei Labs, published a proposal to convert FEI to DAI and distribute protocol-controlled value (PCV) among TRIBE holders.
Fei stablecoin project closed
Santoro has announced that the Fei architecture (FEI) will be discontinued due to “potential future regulatory risks.”
He made a proposal to change the current circulating supply of FEI into DAI – the largest algorithmic stablecoin today.
If this proposal is approved, the remaining PCV reserves will be distributed among TRIBE holders – acting as a balancer to keep the 1:1 exchange rate between FEI and USD.
Another cause of the decision to shut down was the dire consequences of a devastating attack on Fuse-based liquidity pools linked to Fei Labs and its partners from Rari Capital.
DeFi researcher Ignas adds that it was the PCV vulnerability that was the real reason why the FEI team had to shut down:
“Another reason FEI closed down was that the PCV model could not find a suitable product market. With low returns and increased risk, the protocol has trouble finding revenue.”
The roadmap for compensation for victims of the aforementioned hack is the most controversial part of Santoro’s proposals.
Prominent crypto entrepreneur and investor Sam Kazemian has calculated that some affected DAOs will lose 98% of their investments.
After the controversy, the FEI lost its peg to the US Dollar. As of press time, the price is approaching at $0.99.
Before the drop, FEI was one of the largest decentralized stablecoins; only DAI, FRAX, and MIM have larger capitalization. In early 2021, Fei Labs raised over $1.4 billion in funding.